Oil prices steady after steep drop on Trump’s OPEC tweet

CNBC

OPEC-led production cuts and U.S. sanctions on Iran and Venezuela are supporting prices.

Analysts polled by Reuters expect U.S. crude stockpiles to rise for a sixth week.

A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.

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Oil traded roughly flat on Tuesday as Saudi Arabia and the rest of OPEC were expected to stick to their policy of cutting production, despite renewed pressure from U.S. President Donald Trump.

Prices slid on Monday, when many traders were out of the office attending International Petroleum Week, a series of industry events in London, after Trump called on OPEC to ease its efforts to boost the oil market. Prices were “getting too high,” the president said.

“Yesterday was a typical price action you see during IP Week when you have a headline,” said Olivier Jakob, oil analyst at Petromatrix. “But I don’t think it will change anything in current OPEC supply policy.”

Expectations that U.S. crude inventories had risen for a sixth straight week limited the rally.

U.S. crude stocks were seen 3.6 million barrels higher in weekly inventory reports, underlining that supply is adequate in the world’s top consumer. The first such report is due at 4:30 p.m. ET (2130 GMT) from the American Petroleum Institute, following by more comprehensive government figures on Wednesday morning.

Oil is up about 20 percent since the start of the year, when OPEC and non-member producers, such as Russia, began cutting production in an effort to reduce a global glut.

Saudi Arabia and other OPEC members are likely to be cautious about relaxing their supply-cut plan, Jakob said, after a boost in output in the second half of last year ahead of U.S. sanctions on Iran led to a steep slide in prices.

“Will the kingdom budge and increase production or at least keep it steady,” said PVM’s Tamas Varga. “Just two weeks after announcing deeper cuts, it would be a capitulation.”

An OPEC source, in comments to Reuters on Tuesday, agreed with the analysts’ views.

U.S. sanctions against OPEC members Iran and Venezuela have also contributed to the gains and are providing a floor for prices, analysts say.

Optimism about a U.S.-China trade deal also helped prices to rally.

Trump on Monday said he may soon sign a deal to end a trade war with Chinese President Xi Jinping if their countries can bridge remaining differences.